Which if the rate of return of the investors

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Reference no: EM133327682

Case: The company International Sports Systems (ISS) was considering the possibility of acquiring a new model of ERP to replace the old one that the company had in its headquarters. The new ERPs on the market were technologically more efficient and reduced the number of workers needed to operate them. Also, the maintenance costs were quite lower than the old model that had been used for already 10 years.

Two ERP manufacturers had approached the company and had offered two different models that had a price of 750.000 euros and an expected life of 10 years. The estimation of the increase in net income, due to the reduction of operating expenses, obtained during those 10 years for each model are shown below.

If the CFO of ISS had estimated that in order to accept this new investment project, the board of directors would be looking at a cost of capital of a 16%, could you answer the following questions and help him take a decision?

Which if the rate of return of the investors?

Which is the value created by each ERP?

Reference no: EM133327682

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